Michelle Dean

Who doesn't love a romantic comedy about a staid conservative chasing a wild free sprit? Even when the uptight one is a major regulatory institution and the the free spirit is an online exchange for a digital currency?

The Washington Post and Bloomberg are reporting on the SEC's tentative efforts to investigate whether it should maybe, kinda, sorta regulate the growing phenomenon known as Bitcoin.

This sort of courtship is a delicate thing, since no one in the federal government seems quite clear as to who, if anyone, ought to be the Bitcoin watchdog. (See, e.g., the Commodity Futures Trading Commission: "We're looking into that.")

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The SEC very gently asked for a first date by sending a letter earlier this month to an online Bitcoin trading exchange called MPex, asking to see contracts relating to the sale of a Bitcoin gambling business called SatoshiDice.com on the exchange. (The sale was announced back in 2013 at a price of 126,315 bitcoins, the equivalent of something like 12 million at the time.)

The owner of the exchange, a Romanian man named Mircea Popescu, declined. And then he posted his subsequent email exchange with said SEC suitors to the internet.

Highlights from this exchange include a demand to show that the SEC has any authority over Bitcoin, authority which Popescu says would have to be shown by, among other things (all bolding ours):

... an Act of Congress specifically authorising the SEC to review MMORPGs and online activities involving such computer games and their virtual currencies, be they WoW gold, Linden Dollars, EVE Isk, Bitcoin, etc and so forth. Absent that, it may come in the form of a court ruling - definitive and irrevocable or whatever the equivalent of that may be at common law - judging the SEC has such authority. This, of course, is a thornier issue.

Without such authority, Popescu insists, the SEC has to understand that they are perhaps leading him down the garden path which will end in his doing something illegal:

In this sense, asking someone to pick up your daughter from school is a legal request (as far as I know of the rapidly deteriorating legal environment in the US, at any rate). Asking them to pick up your daughter and throw her over a cliff however is an illegal request. The difference between these is, broadly speaking, that the party satisfying the first type of request exposes themselves to no liability, whereas the party satisfying the second type of request does expose themselves, perhaps to significant liability, both civil and criminal.

That said, Popescu admits he is also suspicious of the SatoshiDice.com transaction:

... you will have to appreciate the fact that MPEx has to date, and long before the SEC as much as heard of Bitcoin, pursued with some success if with different means roughly the same agenda, which is to say the exposure of scams and the protection of the general public from scammers of all sorts and types*. In the particular case you brought I must confess I have my own suspicions, which I do not necessarily have either the means to verify or in any way enforce.

But just in case Popescu was not clear, he is not at all inviting the SEC in for a nightcap, although he's not quite going to slam the door on coffee or before-dinner drinks:

In the spirit of candor, let me make it perfectly clear that what's being discussed here is nothing else and nothing short of the SEC's ultimate relevancy and importance in the Bitcoin space, and so far I am not particularly impressed. Let us work together to improve upon this shaky basis if at all possible.

There's a little more after that in which Popescu further demands that the SEC actually formally state that it has no jurisdiction over Bitcoin altogether, though. Which one suspects the SEC is unlikely to do.

In short, this didn't go well. Doubt the SEC's going to give up that easily, though.

[Photo Credit: AP.]

To contact the author of this post, please email michelle.dean@gawker.com.